When the Home Mrtgage Disclosure Act was passed in 1975, it was widely anticipated that data collected would resolve once and for all the controversy over mortgage redlining: Do or do not lending institutions refuse to make loans on properties in designated geographical areas?
Three years later the finger-pointing continues as consumer and housing organizations argue that banks and thrift associations discriminate, while lenders insist that they are only following sound business practices. Recent studies by both sides to little to dispel the controversy, and a forthcoming governmental analysis seems unlikely to do so either.
Given this probability, will or should the act be extended after its scheduled expiration date next year? Hearings will be conducted later this year on the question.
Last week, the leading spokesman of the savings and loan industry urged Congress to permit the law to expire.
"An objective examination... will lead any fair-minded person to conclude it is a waste of money, an unfair burden onlending institutions and a failure in accomplishing any documentably results," said Joseph T. Benedict, president of the U.S. League of Savings Associations. He charged that although the law had cost lenders tens of millions of dollars, the chief beneficiaries were "competitors who are given invaluable marketing information at no cost to them."
The league has twice surveyed its members to ascertain what use is made of the data compiled on loans made in each census tract or zip code in large metropolitan areas.
Benedict said more than 60 percent of the associations have "never had a single request from anyone" to examine the information. And 99 percent of the members had five or fewer requests.
Of the requests made, 32 percent were made by housing, consumer or community activist groups, 20 percent by private citizens, 18 percent by students and 12 percent by the press and public officials. Critics say the material obtained was passed on from one interested group to another.
Since there is no central collection point or provision for analysis of mortgage lending information, all studies have been on fragmented or regional bases. One released last month by the Massachusets Institute of Technology and Harvard University found no geographical redlining in New York state, although it did discover racial discrimination.
The study, commissioned by the Savings Banks Association of New York State, covered 49,000 mortgage applications processed by savings banks between May 1976 and October 1977 in the Albany-Schenectady-Troy area, Buffalo, Rochester, Syracuse, Nassau-Suffolk County and New Yokr City. As reported in the Savings Bank Journal, the study found that "in 30 neighborhoods in New York urban areas where redlining had been alleged, only two -- a small neighborhood in Troy and another in Albany -- were consistent with allegations of geographical discrimination in mortgage lending.
On the other hadn, the researchers ascertained that savings banks had acted favorably by whites, and on eight out of 10 completed applications by blacks, all other factors being equal.
Critics of the MIT-Harvard study point out that not only is the rejection rate for blacks double that for whites, but applications that were rejected before being completed and formally submitted were not counted. The majority of those applications were probably made by blacks.
An eight-city survey done last year by the National Training and Information Center with a grant from the Department of Housing and Urban Development reached a very different conclusion. Executive director of the center is Gale Cincotta, who is also chair of the National People's Action, a Chircago activist group that lobbied hard for the disclosure legislation. The cities were Chicago; Cleveland; Columbus, Ohio; Salt Lake City; Oklahoma City; Waterloo, Iowa, and Wilmington.
This report "confirms the acknowledged lack of lending in major parts of most American cities," while conceding there is debate over the reasons for this lack of investment. It concludes that "large areas of all central cities get very few or no conventional mortgages" and finds "extreme concentration of conventional home mortgage lending in only a few suburban" areas.
The top 25 percent of zip codes or census tracts in the eight cities averaged more than 60 percent of the conventional home mortgages made. "This was particularly true in Hartford, Conn., and Salt Lake City.) "This heavy concentration of lending in very few areas raises a question of whether conventional credit is at least partially constricted throughout most parts of all metropolitan areas," the report said.
It was also found that conventional mortgage lending was lowest in areas with the highest number of FHA-insured home improvement loans.In such places, the report noted, "lenders have the same disincentive to concern themselves with overall neighborhood viability as under the FHA home mortgage program."
Another finding was that savings deposits were particularly high in local branch offices in the same neighborhoods of Cleveland and Salt Lake City where mortgage activity is very low.
Cincotta is fighting to save the Home Mortgage Disclosure Act, and to expand it. "Without this accountability, any increased lending found in research of disclosure data may only be the result of loans to upper income 'urban pioneers,' not a genuine commitment for providing an adequate supply of mortgage credit for residents in low and moderate income neighborhoods," the center study concluded.
Another study commissioned by Congress is being undertaken by the Federal Home Loan Bank Board and the Federal Deposit Insurance Corp. Now nearing completion, it analyzes data from Buffalo, Chicago and San Diego. While the bank board refused to discuss the study, FDIC analyst Gus Johnson said he believed the redlining queston "won't be answered to the satisfaction of anyone." Very little effort, he added, has been put in t analyze the data gathered under the HMDA.
The emphasis is rather on the mechanics of the law, to determine the adequcy of the information requested, and find ways to amend it. He also pointed out that whereas the data may not be able to give a clear picture of how much redlining is going on, it is useful as a basis for determining community needs and making lending criteria.
A dozen Philadelphia lenders undertook to change their loan criteria as a result. (A stiffer antiredling law enacted by the California savings and loan department in 1976 increased the share of loans by state chartered S&Ls in "mortgage deficient" areas from 9 to 19 percent of their total portfolios.)
Although the act will not expire for another year, housing activists are already lobbying for its continuation, while industry lobbyists are opposed. The latter contend disclosure will be made irrelevant by the Community Reinvestment Act, which goes into effect the first, week in February. This obliges lenders to meet community credit needs. If they don't, federal regulators may take this into account to deny new branch applications, for example.
On the Hill, Rep. Fernand St Germain (D-R.I.), influential member of the House Banking Committee, favors extending the disclosure law.